The headline is all too familiar: "Consumers Reject Smart Cards."

How wrong. How misleading. How understandable, unfortunately, given the faulty terminology being applied.

We need to use the correct terminology to educate the market and avoid misleading generalities about failures.

First, let's dispatch the notion that consumers reject smart cards and the technology. In widely publicized U.S. trials, consumers rejected the application, not the card itself. The continuing proliferation of plastic cards is ready proof that consumers embrace a card in which they perceive tangible value.

To draw a parallel, consumers are constantly bombarded with telephone solicitations, but when they decline them we do not say, "Consumer Rejects Telephone." The telephone is only the delivery vehicle.

In the case of smart cards, it would be more accurate, although perhaps not as enticing, to make the headline: "Consumers Reject Card Proposition."

More fundamentally, many people have come to think of smart cards and stored value cards as one and the same. Stored value is one of the many applications that smart cards can support. But stored value can also reside on a magnetic stripe card. Prepaid telephone cards are ubiquitous and are in either format.

Most important, not all smart cards are stored value cards. It is true that most open stored value schemes use chips, because the technology is essential for security. Yet many smart cards support not only stored value, but also credit, debit, and other applications. For example, all smart cards in France support credit and debit applications, but not stored value.

A chip card can contain a memory or a microcontroller chip. Microcontroller cards are also called smart cards.

Smart cards cost $2 to $15 each. The high cost of smart cards, if passed on, may represent a barrier to consumer acceptance.

Multi-application smart cards offer the greatest prospect for commercial success because they distribute the cost of the chip among two or more applications, such as credit, debit, stored value, loyalty, and electronic coupons.

This is not to say that single-use smart cards can't be successful in certain applications where they are perceived to provide a high value. Mobile telephones are a good example. All GSM-standard phones incorporate a smart card. They are costly, but they are most certainly not being rejected.

New technology is initially costly and as a result is usually first successful in high-value-added applications. The first VCRs in the 1970s were used in television studios where a $20,000 cost was small relative to the perceived value. Similarly, a $10 smart card in a $500 GSM phone is accepted as cost-effective.

A key problem in the banking industry is the disparity between the power of the technology and the manner in which it has been employed. The initial use as stored value targets so-called micro transactions-under $10, such as automated vending. The margins are too small to justify a card that costs $10.

So the problem is not the remarkable technology. It is that the intended application cannot support the cost of the platform.

And it is also important to talk about the applications. This is a great technology platform, but at this point it is costly and only high-value- added applications can justify it. The financial transaction industry must match the card technology to the intended application-either lower the cost of smart cards or find higher-value applications.

The banking industry must also realize and act on the fact that stored value is a consumer product. As such it has to offer added benefit to the consumer. It has to be marketed so that the added value is clearly understood, which is not happening today.

Misleading terminology and incorrect generalizations do not help. It is critically important that our industry avoid confusing the marketplace. This will be an essential first step toward successfully marketing smart- card-based applications to consumers.

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